For NH budget writers, it's doom and gloom

CONCORD - House and Senate budget writers got a heaping helping of bad news Monday as they set out to craft a budget for the next biennium amid projections of lower than expected revenue, rising costs and continued uncertainty from Washington.

"The news that we've been bringing over the past few years has been quite dire," said Jeff Hurley of the National Conference of State Legislatures, "so I apologize in advance for some of the distressing information I may provide."

Those comments set the stage for the Joint Economic and Fiscal Orientation of senators and representatives charged with developing a revenue and spending plan for the two-year period that begins July 1.

Hurley said New Hampshire could lose up to $32 million in federal money for state programs, depending on how Congress resolves spending cuts scheduled to take effect in January but delayed by two months.

"That will make it very difficult on states," Hurley said. "New Hampshire's fiscal year ends in June, so the state will have to figure out how to deal with those cuts in a four-month period." And that's assuming Congress takes action on federal cuts in March.

Further complicating the work of budget writers will be a deficit carried over from the current fiscal year that will have to be erased, at least on paper.

Jeff Pattison, director of the Legislative Budget Assistant's office, projected a shortfall of about $25 million by the end of the fiscal year in June, although some lawmakers said it could be as high as $35 million.

The state was projecting a surplus until hospitals suing the state over Medicaid reimbursements began withholding their Medicaid Enhancement Tax payments. Projected revenue from the tax is off by more than $36 million.

Meanwhile, projected savings of $9 million through managed care of Medicaid failed to materialize because of delays in turning the program over to managed-care companies.

House Ways and Means Chairman Susan Almy, D-Grafton, later told reporters it was a perfect storm of lost revenue and projected savings that did not materialize.

"We're not even in a zero-sum game," she said, referring to the fact that lawmakers will have to start their budget with red ink at the top.

The state has slightly more than $9 million in its Rainy Day Fund. "If you use it, you would have a $15.7 million problem," Pattison said. "If you don't use it, you have about a $25 million problem."

Pattison outlined a variety of expenditures suspended in order to balance the 2012-2013 budget that lawmakers will have to decide on, including a mandated increase in the share of the rooms and meals tax that goes to the state's cities and towns.

Lawmakers also heard a forecast from the New Hampshire Center for Public Policy predicting that the next four years should be better than the last four years, but that economic recovery in the state could lag behind the recovery rate for New England and the nation as a whole.

The center predicted that requests for new spending will be significant, particularly from the University of New Hampshire and the Department of Health and Human Services, but that "a sluggish economy will dictate the terms of the policy debates."